If there was any doubt, the agricultural boom ended in red ink for relatively large-scale Illinois farmers last year — an average loss of $2,971 per farm just one year after they notched a net farm income of $107,290, say three University of Illinois economists. Low crop prices were the culprit in Illinois, and across the nation, with comparatively low farm income expected for several years to come.
Agriculture Secretary Tom Vilsack is likely to face questions on the outlook at a Senate Agriculture Committee hearing tomorrow on the state of the farm economy. The hearing comes a couple of weeks after the USDA forecast U.S. net farm income this year at 58 percent of its record-setting high in 2013.
It is likely to be Vilsack’s last appearance before the committee because the Obama administration is in its final months in office. An aide to Agriculture chairman Pat Roberts said the hearing originally was scheduled for earlier this year and was intended as a general hearing on the USDA and the farm economy.
The National Farmers Union and the Farm Aid organization have called for emergency assistance to the farmers and ranchers hardest-hit by the economic downturn. The money could be included in the catch-all bill that is being fashioned to fund the government in the fiscal year that starts on Oct. 1, without specifying how much money was needed. “The time for Congress to act is now,” said NFU president Roger Johnson.
President Zippy Duvall of the American Farm Bureau Federation, the largest U.S. farm group, said last week there is potential for a “big crisis” if conditions do not improve by 2018, when Congress is scheduled to overhaul U.S. farm-subsidy programs.
Producers aggressively cut costs in 2014 and 2015, with the result that farm income did not fall as abruptly or as far as originally forecast, USDA said on Aug. 30 when it updated its farm income estimates. Vilsack said the new figures showed “the unique ability of American farmers and ranchers to plan ahead and make sharp business decisions in a challenging market.”
Despite the downturn since 2013, “farm income over the past five years was the highest average five-year period on record,” said Vilsack. Farm solvency yardsticks, such as the debt-to-asset ratio, have deteriorated since 2013 but remain at low levels, suggesting operators are in healthy shape financially.
Pat Westhoff, of the think tank Food and Agricultural Policy Research Institute, said the USDA estimate “has a little bit of something for folks on both sides” of the debate over whether the farm economy is ailing severely or adjusting to life after a boom. “An important question is whether a period of low output prices means persistent low net income or whether the result will be adjustments to input uses and prices that ameliorate the effects on net income,” said Westhoff.
USDA’s forecasts apply to the sector as a whole and don’t change the situation facing individual farmers, says economist David Widmar at the blog Agricultural Economic Insights. “While the sector level conditions are better than previously expected, producers are still facing tough financial conditions.”
The farmers that were the subject of a blog by Illinois economists Bradley Zwilling, Dwight Raab and Bradley Krapf took part in a not-for-profit organization that provides recordkeeping and farm-management advice to clients. They had an average of 1,177 acres, three times the state average of 365 acres per farm. The USDA says there are 73,600 farms in Illinois.